I'd like to believe that people get what they do through hard work and intelligence. I'd like to believe that everyone gets what they deserve. But having worked on Wall Street for twelve years, and being a connoiseur of sociopaths, I'm unable to sustain that belief.
That leaves me a little shy of libertarian purity.
Libertarians tend to despise crony capitalism of the type they have in China, where connections to top government functionaries are a huge advantage. A libertarian will look at Russia and see, rightly, that becoming one of the oligarchs was a function of currying favor with the drunkard Boris Yeltsin, and then exploiting that connection. Libertarians look at Solyndra and see crony capitalism at its worst.
They're right about all those things.
But libertarians also tend to think that this isn't the way it's done in the West, with our free markets. But even here, business is largely about cronyism.
It would be nice to believe that America is a land where one gets ahead purely by dint of hard work and honesty and brains. But as anyone who's ever worked in a large organization knows, it's also about a lot of other things. Are you good at kissing ass? Do you go out drinking with the boss? Can you skillfully convince your coworkers that you have their backs while sticking a knife into them? Did you get assigned the best accounts? Can you convince people you're smarter than you are? Are you adroit at taking credit and sidestepping blame? And were you lucky enough to have a boss who wants to help his employees rather than use them as scapegoats?
Does all of that constitute merit?
CEO's tend to come from the ranks of those who are best at corporate gamesmanship. And the people who are best at that kind of thing are, almost by definition, sociopaths.
A lot of people will say, well, salesmanship is a big part of business, and it IS a form of merit. They're right, it is. But the best salesmen are also often sociopaths.
Every expert on sociopathy will tell you that sociopaths are vastly overrepresented among the ranks of CEO's. (And COOs, and heads of departments, etc.)
And once these sociopaths make it into the corner office, they generally stack their boards of directors with pals -- cronies -- who will rubber stamp their exorbitant pay packages. (These CEO's are not exploiting poor people, by the way; they're merely ripping off the shareholders of the company, and also the other employees.)
Is that a meritocracy or a kleptocracy?
If you believe the former, consider the following. In 1975, the average CEO made 30 times what the average worker at his company made. Today, many make upwards of 300 times as much. Have CEO's gotten that much better? Have their IQ's gone up tenfold? Do they work ten times as hard?
Some make the case that the CEO's are worth it if the company stock goes up commensurately. Sometimes, it does work out that way. But stocks fluctuate, and in bad times CEO's don't give their previous paychecks back.
Giving a CEO all the credit when a large corporation does well is a little like giving a President credit (or blame) for a good (or bad) economy. Yes, a President can make a small difference at the margins, but mostly, economic cycles seem to have a mind of their own. Likewise with companies: the CEO is often given credit or blame, but there are limits to what one man can do, especially in a large, mature business.
For the most part, CEO's are not guys who built a better mousetrap so the world beat a path to their door. They are guys who, to use the more recent expression, faked it till they made it.
Before those politicians became lobbyists, how beholden were they to their large campaign contributors? Is a business which donates $30,000 to a Congressman and in return is steered a government contract worth millions succeeding on merit, or through crony capitalism?
The return on campaign contributions is something else Trump has talked about. (My recent posts seem to keep coming back to Trump, but my agreement with him is what started the argument after the previous post.) He said that he has donated to various politicians in order to get favors in turn, and that this is why the system is broken. He's right. (And he should know, being partially responsible.)
Trump also said that successful hedge fund managers are often people who just got lucky. If you look at the holdings of the largest hedge funds, you won't be stunned by their originality. Many have Apple, and Google, and a host of other recognizable names. (It doesn't take a genius to say, buy such and such a stock, especially if it's a big name.)
If you believe in efficient markets, or at least rough facsimiles thereof, most fund managers are essentially just making 50-50 bets with their clients' money. Some get lucky, others don't. The ones who are lucky become extremely rich. But if you look at most managers' long term track records, you'll see both good years and bad.
Think of your own investments. Some turned out well, others didn't. Was your IQ higher when you made the good investments, and lower when you made the bad ones? Or do you think there was an element of luck involved?
(This isn't to say that investing well is pure luck, but there is a big and undeniable element of it involved.)
Those who have consistently good records, year after year, often arouse suspicion from the SEC. For every insider trader who gets caught and convicted, there are probably many more who get away with it. (Otherwise, doing it wouldn't be so tempting.) Federal authorities were convinced for a long time that Steven A. Cohen, one of the most successful hedge funders of all time, was doing insider trading. But, they had to settle for convicting one of his underlings.
In any case, when Donald Trump, or even Bernie Sanders, talk about taxing the superrich at higher rates, I don't immediately think, how unjust -- this will move us away from the meritocracy that we are.
But I also don't see this as a punitive measure. It's that if we have a progressive tax system, it shouldn't stop progressing at an income level slightly above middle class.
The middle class are the backbone of America. People who've kept their noses clean and have worked hard their entire lives to have careers as schoolteachers, optometrists, lawyers, doctors, nurses, firemen, engineers, accountants, chiropractors, soldiers, and the ones who make America work. (And their number includes middle managers in the corporations which have sociopathic CEO's at their helms.)
Sometimes, a married couple who both work at what are essentially middle or upper middle class jobs like these can make a combined income of $464,000, which currently would put them in the highest bracket.
Should they be taxed at the same rate as CEO's who make ten million a year?
Here's the best example of whether we live in a meritocratic society: consider who gets the most prestigious job of all, President. Does that selection system reward merit? Think of the circuitous route and series of fortuitous circumstances that propelled Barack Obama into the Oval Office. Was he the smartest, hardest-working, most trustworthy man in the entire country?
Would George W. Bush ever have been considered Presidential caliber if his father hadn't been President? Was he the wisest, most articulate leader this county could produce for eight years? Was Bill Clinton the most honest, honorable man this country could come up with? Did he rise to the top by dint of his honesty and good character?
And so on.
Keep in mind, most corporate climbers don't receive a fraction as much scrutiny and vetting that a potential President does.
I admit, I've made a one-sided case here. There are certainly people, like Henry Ford, Edwin Land, and Steve Wozniak who actually did build better mousetraps, and deserved their fabulous riches.
But people like Trump who've seen how the system works up close, are more familiar with the games described above.
I'm not making the case for a larger government here. I think government should be shrunk. I just wanted to point out that the upper class -- as well as the lower class -- can have a parasitical relationship with society.